This case study focusses on one of the UK’s largest privately owned security and estates management organisations. Our client transacted a considerable sum on payment card processing and merchant service fees, with its existing providers of merchant services, telephone IVR’s and online payment portals.
Despite the criticality of this service to our client’s day to day operations, our client did not have the expertise internally to conduct a thorough tender exercise on what was a critical area of operation for the client.
Our client asked us to undertake a thorough tender exercise on an extremely complex area of their business, which was not widely understood internally and encompassing the entire set of services and suppliers that formed their card payment environment, namely:
- Payment gateways – providers of online and offline payment gateways, which would maximise first-time successful payments from a complex range of payment methods (credit, debit, charge, pre-payment).
- Card acquiring services – the providers of the card acquiring services which facilitate payment between the clients clearing bank; the card scheme; and the client themselves. Our client wanted the reassurance that they would ultimately secure the most competitive transaction rates, whilst minimising premium fees.
- IVR – lastly, the provision of automated telephony services, facilitating payments from members of the public. It was key for the client that efficient and effective payment methods were made available to their customers, who were unable to use traditional online payment portals.
Three complex areas of expenditure, highly regulated, with a balance of interdependencies across the payment environment to be made. Adding further complexity, our client was mid-way through transitioning its primary banking facility.
- A greenfield category which had evolved over many years, resulting in a need for thorough due diligence and a need to support our clients learning in this area.
- A complex supply chain: yet relationships with incumbent suppliers were non-existent.
- The need to manage the project as part of the wider banking facility transition project.
The initial landscape of this project presented fundamental knowledge gaps within the client team of their existing supply chain and the suppliers themselves. We led the key client stakeholders through a thorough period of pre-tender supplier engagement, both with their suppliers and selected alternatives. Ensuring that they had a well-rounded understanding of their arrangements in terms of commercials, cost-modelling, and contract review.
Thereafter, our approach was to lead a comprehensive RFP process and involving the leading providers of payment gateways, card, and scheme providers. The RFP process had several strategically aligned objectives, which had to be assessed through the tender process whilst being balanced against a backdrop of operational constraints.
- To leverage volume and improve margin through reduced payment fees, and improved payment collection.
- To make available as great a range of payment methods to the end customers of our client.
- To ensure any future payment environment is compliant with the requirements of certain public sector customers, whom our client collected payments on behalf of.
Once the strategy was agreed we embarked upon a robust tender process which involved us engaging with 9 market-leading providers in addition to the incumbent supplier.
- - Conduct a well-structured RFP, based on clear and transparent transaction data to incentivise keen supplier bids.
- - Approach the right suppliers in the market, who could deploy intelligence and experience in proposing a payment solution.
- - Leverage the client’s volumes through simplification and consolidation of payment gateways into, potentially, a single provider.
This highly complex project saw Oculus leading an RFP process over two stages. Firstly, a written proposal, focussing on solution design and costs. Secondly, face to face supplier presentations and workshops, providing the opportunity for suppliers to ‘bring-alive’ their solutions.
The conclusion of the project saw our client pursue fundamental changes to its payment environment.
- Keenly priced fees resulting in substantial increases to bottom-line profit on certain service lines saw our client chose to change its card acquirer and scheme provider, to a UK based banking institution.
- Our customer took the opportunity to simplify its payment gateway processes, having seen a more compelling and cost-effective solution within the RFP process.
- A greater choice of payment gateways was made available to the customers of our client, reducing debtor days and aged debt.
The solution was:
- - A well-structured sourcing strategy, leveraging volumes whilst incentivising respondents to propose creative delivery solutions
The project was a great success, enabling our customer to right-size their supply chain with the best of breed of suppliers. More importantly however, our client now has the knowledge of a newly appointed supply chain which it can take ownership of moving forward, ensuring is managed effectively.
From a customer experience standpoint, the customers of our client now benefit from greater choice and flexibility of payment method, which has reduced aged debt, improved first-time transaction success, and overall reduced debt collection volumes.
Lastly, cost savings/margin improvements; our client saw savings of 40% across the category, including reductions in premium service fees and ‘stealth margins’ which are often overlooked.
- - Appointment of market-leading providers appointed on merit and the quality of their proposal.
- - Dramatically reduced operating costs, and the associated improvement on margin position.
- - A supply chain that is efficient and effectively aligned to the clients wider banking facility.